President Bush signed, into law, the
Deficit Reduction Act of 2005 (on Feb. 8, 2006). It was believed,
in some quarters, that the "Half-Loaf" planning strategy was given
"last rites".
"Half-Loaf" transfers were one of
several exceptions to the Medicaid lookback rules.
For those not familiar with the
"Half-Loaf" planning strategy, it roughly unfolds as follows:
PRE-DRA (Deficit Reduction Act of
2005):
a) 50% of a client's available
funds were transferred to an individual. This rendered the client
ineligible for Medicaid assistance for a certain number of months.
b) 50% of a client's available
funds were used to help pay for the client's long-term care for the
months of ineligibility described above.
Depending on the circumstances, a
family could protect roughly 50% of the client's individual funds.
POST-DRA (Deficit Reduction Act of
2005):
a) 50% of a client's available
funds are transferred to an individual. This renders a client
ineligible for Medicaid assistance for a certain number of months.
b) half of a client's available
funds are lent to an individual by the use of a DRA-compliant
Promissory Note.
The repayments, under this
Promissory Note are used to help pay for the client's long-term care
for the months of ineligibility described above.
WARNING
Do not even think of
attempting to use a conventional Promissory Note for Medicaid Planning
purposes.
Conventional Promissory
Notes, frequently used in commercial or real estate transactions, are
not DRA-compliant.
Benefits of "Half-Loaf" Planning"
l) The protected funds can be
used to enhance a loved one's emotional, physical, spiritual and
mental needs beyond what Medicare and Medicaid will cover.
